30148 bd South Africa:30148 South Africa bd 24/04/2009 15:07 Page 21 3. Structuring your company in the UK 3.1 Making sure the law is on your side – The legal framework governing company registration in the UK The primary legislation governing the incorporation and registration of companies in the UK is the Companies Act 1985 (CA85). It should be noted, however, that CA85 is being replaced progressively by the Companies Act 2006 (CA06) between the date of publication of this book and 1st October 2009. Care should be taken to ensure that reference is made to the provisions in force at the time of reading and professional advice should be sought on the applicable provisions, in the event of any doubt. The UK consists of three distinct jurisdictions for company law purposes: (i) England and Wales. (ii) Scotland. (iii) Northern Ireland. This chapter concentrates on the rules that apply in England and Wales, although the rules for Scotland are also very similar. The rules for Northern Ireland are also similar, but they are currently contained in a separate piece of legislation (the Companies (Northern Ireland) Order 1986 and there are a number of differences and the reader is recommended to take specialist advice, if considering establishing a company there. It should be noted that, like CA85, the Companies (Northern Ireland) Order 1986 is being replaced progressively by CA06 and once the CA06 has been fully implemented, with effect from 1 October 2009, it will, except in some limited circumstances, apply to the whole of the UK. There are several options available to overseas companies seeking to create a presence in the UK. The option that is ultimately chosen will depend upon a number of factors including, for example: • the expected nature and scale of the business activities and the levels of risk anticipated in the start up stages; • the intended duration of the business activities; • accounting and taxation considerations; • UK statutory compliance and reporting obligations; and • commercial considerations. Investing in the UK A guide for South African businesses 21 30148 bd South Africa:30148 South Africa bd 24/04/2009 15:07 Page 22 Prior permission is not needed to register, although there are some restrictions on the use of certain words and expressions in corporate and business names (see 4.6 Corporate and Business Names below). Organisations operating in regulated fields (for example banking, defence, oil exploration) may require licenses or prior authorisation to carry on business. There are several types of business entity recognised in English law. This chapter concentrates on the two most commonly encountered forms: • the branch or representative office of a company incorporated outside the UK; and • the incorporated company. Both of these types will now be looked at in turn. 3.2 Branch or place of business of a company incorporated overseas Overseas companies wishing to expand their business activities into new territories will often consider the establishment of a branch or representative office instead of incorporating a new company. The main differences between “branch” and “place of business” registrations by overseas companies Overseas limited liability companies (incorporated outside Great Britain) having established a place of business in Great Britain are required to register their presence with Companies House within thirty days. There are no provisions that allow registration of a branch or place of business in advance. Current legislation distinguishes between foreign companies with a “place of business” (often referred to as a representative office) and those with a “branch” presence. Place of business: Companies registering under the “place of business” regime will be those whose business activities in the UK are ancillary or incidental to the overseas company’s business as a whole. Such incidental activities may include warehouse facilities or administrative offices established for the benefit of the company, internal data processing facilities and share transfer and registration facilities. Branch: A “branch”, by contrast, will be a part of a company, organised so as to conduct business on behalf of that company. This means that a client doing business with the company will generally be able to deal direct with the branch in this country instead of dealing with the company in its home state. A branch is not a separate corporate entity, but is typically run along lines that are similar in concept to those of a subsidiary company. “Branch” or “place of business”? Care should be taken to assess whether the activities being carried on are merely ancillary or incidental to those of the overseas company itself (which would permit registration under the “place of business” regime) or whether the activities are broader and will comprise those of a “branch”. Investing in the UK A guide for South African businesses 22 30148 bd South Africa:30148 South Africa bd 24/04/2009 15:07 Page 23 It is more common for overseas companies to register under the “branch” regime rather than the “place of business” regime, because their activities generally extend beyond those of a purely ancillary or administrative nature. Companies with unlimited liability will always register under the “place of business” regime, even if the underlying activities are those that would evidently be those of a “branch”. A branch is often the favoured option for overseas businesses in the early stages of international expansion. Once a solid business presence has been established, branch activities are often transferred to limited companies. The branch may also be an appropriate form for use in connection with specific business ventures or projects with a known duration, such as a building project or equipment installation project. Registering a branch or place of business The branch and place of business registration requirements are broadly similar. In both instances the overseas company must supply corporate information, in statutory forms, detailing the company’s activities and corporate structures. (See also Note 1 at paragraph 7 Current and Future Developments, below). The following is an illustrative, but not exhaustive, list of the sort of information that must be supplied with the branch and place of business registration forms (forms BR1 and 691 respectively): • the names, residential addresses and other personal details of directors and secretaries (however, see Note 3 at paragraph 7 Current and Future Developments, below); • details about the company (including corporate name, business trading name (if different from its corporate name), official or registered number, jurisdiction, governing law, legal form, capital structure, accounting details and obligations); • branch office address, brief explanation of branch activities and details of the UK resident representative authorised to accept service of legal notices and official correspondence on behalf of the company; and • copies of constitutional documents (evidence of registration, articles of incorporation and charter or other equivalent management rules). It must be stressed that copy documents must be officially certified in the country of incorporation and, if such documents are in a language other than English, accompanied by authenticated translations. The specific requirements in this regard must be closely adhered to. There is a registration fee payable, which is currently UK£20 (or UK£50, if a same-day registration is being sought). Investing in the UK A guide for South African businesses 23 30148 bd South Africa:30148 South Africa bd 24/04/2009 15:07 Page 24 Once the legal requirements have been fulfilled, the Registrar then registers the branch or place of business and issues a certificate of registration evidencing the registration. Ongoing filing requirements for a branch or place of business 1. Filing accounts with the registrar There are annual accounts filing obligations in respect of overseas companies with a registered branch or place of business in the UK. Place of business: the form and content of accounts that must be delivered in respect of overseas companies with a place of business registration is set out in the Overseas Companies (Accounts) (Modification and Exemptions) Order 1990. These accounts (based on UK formats) do not need to be audited, nor are they as detailed as required for companies incorporated in Great Britain. (See also note 1 under paragraph 7 Current and Future Developments, below). Branch: for branches the precise form of the accounts and filing deadlines that apply depend upon the accounts preparation and disclosure obligations in the country of incorporation. If the company is subject to a requirement in its home country to prepare, have audited and publish accounts, then it is a copy of those accounts that must be submitted to Companies House If there are no such requirements for the preparation, audit and public disclosure of accounts in the country of incorporation, then accounts prepared along the lines of those required under the place of business regime (described above) are required. It must be stressed that, either case, the accounts that are required to be delivered for filing are those of the overseas company itself in its entirety and not those relating only to the activities of the branch or place of business. Special rules apply if the company is a parent company and is proposing not to prepare submit concolidated accounts. Accounts in a language other than English must be accompanied by a certified translation. 2. Notification of changes Any changes to the information disclosed in the initial registration papers must be notified to the Registrar of Companies on the prescribed forms. Such changes generally include change of officers, address changes, corporate name changes and constitutional and statutory changes. (See also Note 1 of Paragraph 7 Current and Future Developments, below). Care should be taken to ensure that UK filing obligations are considered and dealt with in a timely manner whenever there is a statutory change affecting an overseas company with a branch or place of business in the UK.